Disruptive Technology

Principles of Disruptive Technology:

1. Companies Depend on Customers and Investors for Resources. In order to survive, companies must provide customers and investors with the products, services and profits that they require. The highest performing companies, therefore, have well-developed systems for killing ideas that their customers don't want. As a result, these companies find it very difficult to invest adequate resources in disruptive technologies lower margin opportunities that their customers don't want - until their customers want them. And by then, it is too late.
2. Small Markets Don't Solve the Growth Needs of Large Companies. To maintain their share prices and create internal opportunities for their employees, successful companies need to grow. It isn't necessary that they increase their growth rates, but they must maintain them. And as they get larger, they need increasing amounts of new revenue just to maintain the same growth rate. Therefore, it becomes progressively more difficult for them to enter the newer, smaller markets that are destined to become the large markets of the future. To maintain their growth rates, they must focus on large markets.
3. Markets That Don't Exist Can't Be Analyzed. Sound market research and good planning followed by execution according to plan are the hallmarks of good
   management. But, companies whose investment processes demand quantification of market size and financial returns before they can enter a market get paralyzed when faced with disruptive technologies because they demand data on markets that don't yet exist.
4. Technology Supply May Not Equal Market Demand. Although disruptive technologies can initially be used only in small markets, they eventually become competitive in mainstream markets. This is because the pace of technological progress often exceeds the rate of improvement that mainstream customers want or can absorb. As a result, the products that are currently in the mainstream eventually will overshoot the performance that mainstream markets demand, while the disruptive technologies that underperform relative to customer expectations in the mainstream market today, may become directly competitive tomorrow. Once two
   or more products are offering adequate performance, customers will find other criteria for choosing. These criteria tend to move toward reliability, convenience and price, all of which are areas in which the newer technologies often have advantages.

Only by recognizing the dynamics of how disruptive technologies develop, can managers respond effectively to the opportunities that they present. Specifically he [Mr. Christensen] advises managers faced with disruptive technologies to:

• Give responsibility for disruptive technologies to organizations whose customers need them so that resources will flow to them.
• Set up a separate organization small enough to get excited by small gains.
• Plan for failure. Don't bet all your resources on being right the first time. Think of your initial efforts at commercializing a disruptive technology as learning opportunities. Make revisions as you gather data.
• Don't count on breakthroughs. Move ahead early and find the market for the current attributes of the technology. You will find it outside the current mainstream market. You will also find that the attributes that make disruptive technologies unattractive to mainstream markets are the attributes on which the new markets will be built.

Source: The Innovator's Dilemma. The Revolutionary Book That Will Change the Way You Do Business (1997) by Clayton M. Christensen.

Interesting book.

According to What Is.com a disruptive technology is “one that displaces an established technology and shakes up the industry or a ground-breaking product that creates a completely new industry.” For example, email transformed the way we communicating, largely displacing letter-writing and disrupting the postal and greeting card industries.

Along the same lines, Industry Week.com has an article called “Disrupt or Be Disrupted: Eight Principles of Disruptive Innovation.”